SaaS: Software as a Service and Service as a Software
In 2012, the Gartner Group issued a study saying in the next five years CMOs would spend more on technology than CIOs. That may be true, but Gartner did not seem to comment on how much CIOs spend on technology services and systems integration, and how much more CMOs would end up spending on services as well – all as part of the great move to get the new generation of Gen X CMOs to leverage SaaS software, automation, and analytics as part of the reinvention of their business discipline.
As the CEO of the leading SaaS company focused on SEO software, as well as the leading independent search agency (I love the new euphemism of the “technology-enabled marketing solutions company.”), I find it perplexing why some advertisers, analysts, and even adversaries find it hard to categorize Covario and Rio SEO.
We’re often asked, “Are you a software company, or are you a services company?” The inquirer is occasionally dismayed when I answer, “We’re the best of both.”
This stems from the traditional IT and SaaS world. It was a world where global software providers, such as IBM, Oracle, HP, and Adobe, created software and large scale systems integrators. It was also a world where outsource providers like Accenture, Infosys, Sapient, and others provided implementation, systems integration, and end-to-end “managed services” relationships – outsourcing a company’s entire IT function.
The old model was you paid for a perpetual license for software to “own” a copy. Plus, you’d pay 20 percent of that license fee annually for maintenance. On top of that, you’d pay a systems integrator three to five times the license cost to set the software up and help maintain the system over time. A $100K software license would cost you $100K for the license and $500K in services, plus the associated internal staffing costs (remember when many vendors told you to expect to need at least one to two DBAs – database administrators – per license?), in addition to $100K in maintenance over five years, at which point you were probably moving to a new software suite anyways.
Then Marc Benioff created Salesforce.com, which offered rentable software in the cloud, invented the new pricing model of one low price monthly in annual subscriptions, and coined the term SaaS – Software as a Service. Sure, the software ended up being a lot cheaper and the payment terms more favorable, but what most people didn’t know is that clients still needed experts to help set it up and migrate old databases. They still needed a CRM administrator, or two, in place of the old DBAs to keep their systems clean, and they still needed sales managers and sales teams to be trained, use the tools, and make calls and sales.
What’s interesting when you try to apply this model to the marketing function in large companies is that it doesn’t work the same. Sales executives tend to have large in-house sales teams and channel sales teams. They need everyone to input the same kind of data, and report on it. The sales function at many companies has been boiled down to a scalable, repeatable process with approaches like Miller-Heiman, or Selling to VITO, encapsulated in CRM packages that minimize the creativity and maximize the productivity.
The marketing function in many cases, however, is exactly the opposite. CMOs have very small staffs, and most of the work is outsourced to agencies. There is a high degree of creative work, internally and externally, and it resides across a few, very specialized people. There are areas where work can be automated and productivity maximized, and where the creativity and human judgment can actually be replaced by more sophisticated, advanced analytics – areas like paid search and real-time display buying, email marketing, and also some portions of SEO.
However, certain areas are less accessible for automation by software and are more likely to continue to be executed in-house, or by outsourced agency services. These encompass anywhere there is creativity, subjectivity, asymmetric negotiations, and buying – areas like TV media buying and production, rich media production and placement, much of social media marketing, and some aspects of SEO.
As one senior software executive recently lamented to me, “We are trying to leverage our model of selling to CIOs and sales heads to sell to CMOs, but it isn’t working. Marketers buy software differently!” Ah, yes they do! They need to know they will get the benefits of the software, but also know who is going to use it – their internal team, or their agency team? And often, they want the solution bundled.
While the Gen X CMO is willing to do more in-house with SaaS-based software and their own team, they also take much more of an interest in what software automation packages their agencies may be leveraging. They still need to know how the whole solution will get done, and what the ROI will be.
But, when you get right down to it, isn’t that what the phrase “software as a service” actually implies – that the software is being delivered as a service, through machines and people, in a way that costs less up front and is easier to maintain, upgrade, or replace over the long term? What if you thought of it instead as “service as a software,” i.e. getting the benefits of various outsourced or in-sourced services, but packaged up to be as automated as possible?
In essence, all software is just packaged and encoded knowledge. CRM software is how to sell, encoded. HRIS software is how to manage people and benefits, encoded. ERP software is how to do accounting, encoded.
For accounting, you can use Quicken, desktop or online, for consumers, Quickbooks desktop or SaaS for small business, NetSuite SaaS for mid-sized businesses, Oracle or SAP on-premise, or now SaaS for enterprises. A very large business may have Accenture, or Deloitte, build a custom solution.
Even with all that software, organizations still need CFOs and large finance teams to input, manage, and analyze the data, and they still rely on accountants and auditors to further support the solution. And this is for the most regulated, formulaic, and automatable functions in business – the accounting and finance functions!
Every business function, especially the marketing function, is a blend of art and science. Each business discipline contains tasks that are repetitive, automatable, and analyzable for quality, precision, and results. This is the kind of knowledge that is package-able into software, whether you want to call it SaaS for “Software as a Service,” or SaaS for “Service as a Software.”
This is the kind of knowledge that is at the science end of the packaged knowledge continuum. In digital marketing, this might include paid search marketing and real-time bidding on display campaigns. Portions of SEO are also conducive to automation, such as large website technical construct analysis, content analysis and management, and link analysis and prioritization. That said, each business discipline also contains many areas and tasks that are not automatable or not frequently repeated, like the creation of a quarterly marketing campaign, or the negotiation of the annual TV upfront, or the creation and distribution of smarter content as part of an SEO and social media campaign.
Perhaps this is why we see companies like Salesforce.com acquiring Buddy Media and Adobe acquiring Efficient Frontier. Both are SaaS-based software companies that have acquired hybrid-solutions companies, with equal or more parts service than software, to add to their “marketing cloud” stacks.
I’ve often said that the marketing function in business is the last big business discipline to get automated – partially because the amount of creative, non-repeatable tasks in this function, and because of the historical degree of outsourcing in this function. Yet, with the advent of the Gen X CMO and new consumer devices and advertising technologies, the day is upon us, ushering an exciting new era of marketing focused on quality content.
Marketers and their agencies will need to learn to use SaaS-based software and analytics to not just buy more ads and make more content, but to do so in a much smarter manner that leads to smarter content, smarter search results, and smarter marketing overall.